Last Man Standing: Is Airbnb Changing the Rental Landscape?

by | Aug 14, 2017 | Tenant Screening

A Montreal condo owner finds himself in a unique position: he’s the only permanent resident in a nine-unit condo conversion. All the other units, he says, are being run as short-term vacation rentals. In a news report, he describes walking the halls with strangers, unable to build a sense of community.

Online vacation hosting site Airbnb has gained so much popularity that local governments are reviewing its impact on the availability of permanent rental housing.

What started as a platform for tenants to host overnight guests on the sofa is morphing into a whole new rental system where entire units — and entire buildings — are being offered for overnight or short-term rentals. After receiving a barrage of complaints from local hotels, New York City instituted restrictions on these sublets, requiring a host be present during the guest’s visit. Reports indicated that some tenants in rent controlled-apartments in that city were earning a tidy profit by staying with friends while renting their units out nightly.

A report of Airbnb rental listings published by the Urban Politics and Governance Lab in McGill’s School of Urban Planning concludes that about one-third of all active Airbnb properties are multiple listings, indicating that some property management firms are renting short-term rather than offering rentals to longer-term residents. Airbnb has disputed those findings, but the company is soliciting support from landlords to clear the way for entire units — or buildings — to rent nightly. According to Airbnb, about 10,000 apartment units are currently enrolled in such a program.

Another service, Pillow Residential, emerged recently and is striving to work alongside tenants and landlords as a means to automate the nightly sublet process. Pillow is marketing to building owners willing to consider Airbnb sublets in return for a portion of the tenants’ profits. It also hopes to attract landlords who want to rent out vacancies on a short-term basis through Airbnb while searching for a long-term tenant. Participating landlords are required to modify their lease agreements to allow for short-term rentals. However, even participating landlords cannot discover the identity of the guests visiting those properties through Airbnb.

While some management firms are profiting, others are not as accepting. A large property management company in the U.S. is suing Airbnb for interfering with contractual relations between the landlord and its tenants. The manager alleges that Airbnb ignores the potential income loss landlords could suffer for undisclosed tenant sublets, and that Airbnb does not do enough to halt sublets where the tenant does not have the landlord’s consent.

Along with reducing rental stock and driving up rents, another serious concern for this rental model is the anonymity of the occupants in the property. The danger with short-term sublets is simple: the guests that have access to a property, including common areas, are not vetted to the extent that most landlords conduct tenant screening on longer-term renters. As a result, permanent residents and hosts are subjected to potential dangers, like crime and disruption. Living with strangers — especially people on vacation — is not what many tenants signed up for.

Landlords may need to choose a strategy and adapt their property management policies accordingly.

Regardless of the position a landlord takes on short-term rentals, it is imperative to institute a vigorous tenant screening process, both for the primary tenant and for any guests that may stay at the property. A person does not have to be in the unit for any particular length of time to cause income loss.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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